1 00:00:02,520 --> 00:00:07,040 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:09,200 --> 00:00:13,840 Speaker 2: This is a breaking news update from Bloomberg instant reaction 3 00:00:14,120 --> 00:00:17,959 Speaker 2: and analysis from our three thousand journalists and analysts around 4 00:00:18,000 --> 00:00:18,480 Speaker 2: the world. 5 00:00:19,280 --> 00:00:22,000 Speaker 3: A new fed chair in a new era. 6 00:00:22,239 --> 00:00:25,279 Speaker 4: As we do parse through some of the commentary, the 7 00:00:25,360 --> 00:00:28,240 Speaker 4: Kevin Warresh Fedder Reserve is a very different federal reserve 8 00:00:28,280 --> 00:00:30,560 Speaker 4: than the Drome Powell of Federal Reserve. Not only are 9 00:00:30,560 --> 00:00:32,120 Speaker 4: we looking at a statement that was only one hundred 10 00:00:32,159 --> 00:00:34,440 Speaker 4: and thirty two words versus one hundred and seventy five 11 00:00:34,479 --> 00:00:37,919 Speaker 4: words at the April FMC meeting, we're talking about a 12 00:00:38,000 --> 00:00:41,880 Speaker 4: new framework, a new regime, and not giving enemy forward 13 00:00:41,880 --> 00:00:44,360 Speaker 4: guidance because guess what, there's a task force for that 14 00:00:44,680 --> 00:00:46,280 Speaker 4: right now. If you take a look of the reaction 15 00:00:46,360 --> 00:00:49,239 Speaker 4: in Marcus, they are taking this hawkish tilt and they 16 00:00:49,280 --> 00:00:51,960 Speaker 4: are running with it. You can see across the board 17 00:00:51,960 --> 00:00:54,120 Speaker 4: declines on the S and P and the Russell two 18 00:00:54,200 --> 00:00:57,920 Speaker 4: thousand NAZAC now a little changed as they parse through 19 00:00:58,040 --> 00:01:00,120 Speaker 4: all of the reactions. When you take a look at 20 00:01:00,160 --> 00:01:02,480 Speaker 4: the yield space, that's where some of the fireworks are happening. 21 00:01:02,640 --> 00:01:06,000 Speaker 4: It is yield curve compression time in a massive, massive way. 22 00:01:06,120 --> 00:01:09,119 Speaker 4: Thirteen basis point rise on the two year to four 23 00:01:09,280 --> 00:01:12,520 Speaker 4: point one point eight percent. Suddenly the idea of one 24 00:01:12,600 --> 00:01:15,440 Speaker 4: rate hike or even more is on the table. As 25 00:01:15,440 --> 00:01:18,400 Speaker 4: this FED share talks about how this Federal Reserve has 26 00:01:18,640 --> 00:01:22,120 Speaker 4: a commitment to the American people to get price stability 27 00:01:22,120 --> 00:01:24,560 Speaker 4: and that is their goal. He s poo pooed some 28 00:01:24,680 --> 00:01:27,360 Speaker 4: of the dual mandate the thirty year yields. They like 29 00:01:27,440 --> 00:01:30,080 Speaker 4: that down two basis points and it is dollar strength 30 00:01:30,120 --> 00:01:33,280 Speaker 4: across the board. A big question, Scarlett foo was would 31 00:01:33,400 --> 00:01:36,720 Speaker 4: the President have any commentary on this, And it turns 32 00:01:36,720 --> 00:01:37,759 Speaker 4: out that he does. 33 00:01:37,800 --> 00:01:38,080 Speaker 5: He does. 34 00:01:38,200 --> 00:01:40,440 Speaker 6: He's spoken to reporters several times today he's at the 35 00:01:40,480 --> 00:01:43,800 Speaker 6: G seven in France, and he had said that it's 36 00:01:43,840 --> 00:01:46,280 Speaker 6: all right that they held rates whatever. 37 00:01:46,600 --> 00:01:48,640 Speaker 5: He also said that the Fed raising. 38 00:01:48,440 --> 00:01:51,800 Speaker 6: Rates is a possibility, It's possible it could happen, So 39 00:01:52,360 --> 00:01:54,920 Speaker 6: no sign of anger from him. We do know that 40 00:01:54,920 --> 00:01:57,640 Speaker 6: Scott Besson, the Treasury Secretary, had kind of eased the 41 00:01:57,680 --> 00:02:00,800 Speaker 6: path there. He had been talking about the prospect of 42 00:02:00,840 --> 00:02:02,480 Speaker 6: the FED not being able to cut rates as the 43 00:02:02,520 --> 00:02:06,920 Speaker 6: President would want, and that inflation oil prices remains top 44 00:02:06,920 --> 00:02:09,119 Speaker 6: of mind. So we did just listen to Fed Shair 45 00:02:09,320 --> 00:02:12,240 Speaker 6: Kevin Warre, speaking moments ago, is you any kind of 46 00:02:12,240 --> 00:02:15,480 Speaker 6: forward guidance, Where did you put your potential dot if 47 00:02:15,520 --> 00:02:16,320 Speaker 6: you were to have a dot? 48 00:02:16,400 --> 00:02:17,960 Speaker 3: Well, he has an answer for that. 49 00:02:19,480 --> 00:02:22,480 Speaker 1: I'm appointing a task force in each of five areas 50 00:02:23,000 --> 00:02:27,560 Speaker 1: that are central to the broad conduct of monetary policy. First, 51 00:02:27,960 --> 00:02:35,080 Speaker 1: FED communications, second the fed's balance sheet, Third, our use 52 00:02:35,400 --> 00:02:41,440 Speaker 1: and reliance on existing data sources, Fourth, productivity and jobs 53 00:02:41,800 --> 00:02:46,239 Speaker 1: in an era of transformation, and last the fed's inflation frameworks. 54 00:02:46,600 --> 00:02:50,080 Speaker 1: My expectation, I'm still in the business of recruiting and 55 00:02:50,120 --> 00:02:54,079 Speaker 1: finalizing them. My expectation is the task forces will begin 56 00:02:54,240 --> 00:02:57,080 Speaker 1: work in the next couple of weeks and we'll start 57 00:02:57,080 --> 00:03:00,400 Speaker 1: to get some more information from them, some more framing 58 00:03:00,440 --> 00:03:03,120 Speaker 1: of how they see things, starting in the fall end, 59 00:03:03,400 --> 00:03:06,440 Speaker 1: hopefully most if not all of them, concluding by year end. 60 00:03:06,680 --> 00:03:08,760 Speaker 4: Joining us now to discuss is Kate Moore of City 61 00:03:08,800 --> 00:03:11,000 Speaker 4: and Jim Bianco of Bianco Research, or either of you 62 00:03:11,320 --> 00:03:12,760 Speaker 4: being recruited for the task force. 63 00:03:12,800 --> 00:03:13,440 Speaker 3: We'll start with that. 64 00:03:13,840 --> 00:03:16,840 Speaker 7: I just texted my text messages and nothing came through yet, 65 00:03:16,919 --> 00:03:19,120 Speaker 7: so but it's still early at the profressor. All right, 66 00:03:19,160 --> 00:03:21,320 Speaker 7: what's your first reaction to what we just heard, Kate, Well, 67 00:03:21,360 --> 00:03:23,639 Speaker 7: a couple things. Number One, there was broad acknowledgement that 68 00:03:23,639 --> 00:03:26,160 Speaker 7: the economy is in good shape. There's also broad acknowledgement 69 00:03:26,200 --> 00:03:29,080 Speaker 7: that the rates as they currently stand are not actually 70 00:03:29,080 --> 00:03:33,040 Speaker 7: restricting any major sector outside of course housing, which worsh mentioned. 71 00:03:33,520 --> 00:03:35,240 Speaker 3: And there was like a lot. 72 00:03:35,080 --> 00:03:37,440 Speaker 7: Of collegial talk about, you know, how well the FED 73 00:03:37,520 --> 00:03:41,120 Speaker 7: is working together, how well they're communicating, how welcoming Warshfeldt, 74 00:03:41,160 --> 00:03:43,480 Speaker 7: you know, in his new chair position. So there was 75 00:03:43,520 --> 00:03:45,640 Speaker 7: actually kind of a positive tone about both the economy 76 00:03:45,640 --> 00:03:48,040 Speaker 7: and the functioning of the institution and in. 77 00:03:48,120 --> 00:03:49,400 Speaker 5: Terms of changes that he's made. 78 00:03:49,440 --> 00:03:52,240 Speaker 6: Lisa, you already highlighted the fact that the statement was 79 00:03:52,320 --> 00:03:52,760 Speaker 6: much shorter. 80 00:03:52,800 --> 00:03:54,160 Speaker 5: The news conference was sugar. 81 00:03:53,920 --> 00:03:56,400 Speaker 6: As well, and we definitely heard a different side to 82 00:03:56,640 --> 00:04:00,880 Speaker 6: these Fed news conferences, Jim. One thing that Kevin Morshman 83 00:04:00,960 --> 00:04:05,000 Speaker 6: clear was that for longer term changes, including communications, including. 84 00:04:05,000 --> 00:04:07,040 Speaker 5: The dot plot, there's going to be a task force 85 00:04:07,080 --> 00:04:07,280 Speaker 5: for that. 86 00:04:07,800 --> 00:04:11,160 Speaker 6: How do you anticipate that kind of information to come out? 87 00:04:11,280 --> 00:04:12,840 Speaker 6: Is that going to be a surprise when it just 88 00:04:12,840 --> 00:04:15,440 Speaker 6: comes out, or is he the FED going to give 89 00:04:15,520 --> 00:04:17,200 Speaker 6: markets time to digest all of them. 90 00:04:17,480 --> 00:04:19,760 Speaker 8: Well, he also said that the task force might include 91 00:04:19,760 --> 00:04:23,120 Speaker 8: people outside the FED, so I would assume that you're 92 00:04:23,160 --> 00:04:25,240 Speaker 8: going to have leaks, so you might as well be 93 00:04:25,839 --> 00:04:28,359 Speaker 8: doing it almost in real time, telling us what's happening, 94 00:04:28,600 --> 00:04:30,560 Speaker 8: because there's going to be some people outside the FED. 95 00:04:30,600 --> 00:04:33,760 Speaker 8: But in general, I think that this is a welcome thing. 96 00:04:33,960 --> 00:04:37,520 Speaker 8: The FED needed to change. This communication style that they 97 00:04:37,520 --> 00:04:40,719 Speaker 8: have now is about twenty years old, and the world 98 00:04:40,720 --> 00:04:44,840 Speaker 8: has changed. Communication has changed, the role of the FED 99 00:04:44,880 --> 00:04:48,520 Speaker 8: has changed, and so it is a positive thing. I'll 100 00:04:48,520 --> 00:04:51,400 Speaker 8: also mentioned that one of the things that Walsh talked 101 00:04:51,400 --> 00:04:55,520 Speaker 8: about before you was chairman was all of these prognostications 102 00:04:55,520 --> 00:04:57,800 Speaker 8: the Fed's going to cut rates carding to the dot plot. 103 00:04:58,279 --> 00:05:00,880 Speaker 8: He pointed out it very rarely happens the way that 104 00:05:00,920 --> 00:05:02,520 Speaker 8: they say it's going to be. So it was always 105 00:05:02,520 --> 00:05:05,720 Speaker 8: an institution that was giving an inaccurate forecast, and we 106 00:05:05,720 --> 00:05:08,680 Speaker 8: were over relying on that inaccurate forecast, and maybe it 107 00:05:08,720 --> 00:05:10,640 Speaker 8: is time that they try a different approach. 108 00:05:10,920 --> 00:05:14,160 Speaker 6: Kate is chair Kevin Worsh kind of consistent with what 109 00:05:14,440 --> 00:05:17,560 Speaker 6: former governor Fed Governor Kevin Worsh sounded. 110 00:05:17,160 --> 00:05:19,480 Speaker 7: Like, I mean, I'm going to go back to this world. 111 00:05:19,520 --> 00:05:21,440 Speaker 7: I just mentioned a moment ago collegial. I mean, it 112 00:05:21,480 --> 00:05:24,960 Speaker 7: really felt like that was the sort of the overall tone. 113 00:05:25,040 --> 00:05:27,440 Speaker 7: And I think something is very important here, which is 114 00:05:27,440 --> 00:05:31,160 Speaker 7: that we are having more consistency of policy here between 115 00:05:31,680 --> 00:05:34,560 Speaker 7: last meeting with Chair Powell and Chare Wosh, which I 116 00:05:34,600 --> 00:05:36,640 Speaker 7: think is going to be comforting to the markets, even 117 00:05:36,640 --> 00:05:38,320 Speaker 7: if risk assets, you know, dip. 118 00:05:38,160 --> 00:05:39,440 Speaker 9: A little bit on this news. 119 00:05:39,760 --> 00:05:42,120 Speaker 7: It's just kind of reiterating what we already know though, 120 00:05:42,200 --> 00:05:45,200 Speaker 7: right that inflation has been warmer, spicier than many people 121 00:05:45,200 --> 00:05:49,919 Speaker 7: had expected, certainly even pre the Iran conflict, and we 122 00:05:50,040 --> 00:05:51,839 Speaker 7: know that there's been a broadening out of some of 123 00:05:51,839 --> 00:05:53,839 Speaker 7: these price pressures while the labor market had been solid. 124 00:05:53,880 --> 00:05:56,880 Speaker 7: I just felt like, you know, Chair Worsh made those points, 125 00:05:56,960 --> 00:06:00,640 Speaker 7: conceded that, and so was consistent with the person that 126 00:06:00,680 --> 00:06:02,799 Speaker 7: he has always been, which is someone who's really grounded 127 00:06:02,839 --> 00:06:03,440 Speaker 7: in data. 128 00:06:03,520 --> 00:06:05,279 Speaker 4: There's also been a comment and I thought that his 129 00:06:05,360 --> 00:06:08,400 Speaker 4: answer to one of the questions was really interesting about 130 00:06:08,760 --> 00:06:12,240 Speaker 4: why he thinks that this shouldn't be an overly communicative fed, 131 00:06:12,600 --> 00:06:14,680 Speaker 4: how the data and how the market responds to the 132 00:06:14,760 --> 00:06:16,599 Speaker 4: data should be done more purely. 133 00:06:16,720 --> 00:06:18,840 Speaker 3: Take a listen to exactly what he had to say. 134 00:06:19,839 --> 00:06:25,400 Speaker 1: I think financial markets perform best when they react to 135 00:06:25,560 --> 00:06:30,960 Speaker 1: incoming data. I think the financial markets work less efficiently 136 00:06:31,480 --> 00:06:34,360 Speaker 1: when they ask a question, how will the Federal Reserve 137 00:06:34,520 --> 00:06:39,360 Speaker 1: react to that incoming information. The more that markets are 138 00:06:39,400 --> 00:06:43,640 Speaker 1: paying attention to what's happening in the real economy, deciding 139 00:06:43,720 --> 00:06:46,960 Speaker 1: what's good data and what's less good data, the more 140 00:06:47,000 --> 00:06:50,479 Speaker 1: financial markets can price what they believe is the most 141 00:06:50,640 --> 00:06:52,360 Speaker 1: likely and what are the tail risks. 142 00:06:53,279 --> 00:06:56,240 Speaker 4: This actually, to me, I highlighted a real question that's. 143 00:06:56,120 --> 00:06:58,800 Speaker 3: Been asked Jim. Is this sort of codifying the fact 144 00:06:58,800 --> 00:06:59,960 Speaker 3: that the Fed's going to follow the market. 145 00:07:00,040 --> 00:07:01,839 Speaker 4: So the market is going to be sort of the 146 00:07:01,960 --> 00:07:04,159 Speaker 4: arbitrator of what the FED should do because it is 147 00:07:04,200 --> 00:07:07,320 Speaker 4: a pure indicator of the collective wisdom of crowds. 148 00:07:07,680 --> 00:07:10,200 Speaker 8: I think the market should be the thing that the 149 00:07:10,200 --> 00:07:10,960 Speaker 8: FED follows. 150 00:07:11,240 --> 00:07:12,400 Speaker 2: His statement reminded me. 151 00:07:12,360 --> 00:07:14,720 Speaker 8: Of that famous line from the economist Charles Goodheart. When 152 00:07:14,720 --> 00:07:17,640 Speaker 8: a measure becomes a target, it seeks being a measure. 153 00:07:17,720 --> 00:07:20,520 Speaker 8: Meaning if the FED has already decided what they're going 154 00:07:20,560 --> 00:07:22,760 Speaker 8: to do, then we can ignore the pay or report. 155 00:07:22,800 --> 00:07:25,080 Speaker 8: We could ignore the CPI. Maybe we shouldn't. Maybe we 156 00:07:25,120 --> 00:07:27,480 Speaker 8: should be reacting to all of this and having the 157 00:07:27,560 --> 00:07:30,520 Speaker 8: market express its best judgment and then letting the FED 158 00:07:30,560 --> 00:07:32,920 Speaker 8: bring in that information that I agree with him is 159 00:07:32,960 --> 00:07:35,480 Speaker 8: the proper way for things to be done. Then them 160 00:07:35,520 --> 00:07:38,400 Speaker 8: to just summarily decide what they're going to do, say 161 00:07:38,440 --> 00:07:40,320 Speaker 8: they care about the data, but they've already made. 162 00:07:40,200 --> 00:07:40,840 Speaker 5: Up their mind. 163 00:07:40,960 --> 00:07:41,680 Speaker 3: Kate, do you agree? 164 00:07:41,880 --> 00:07:43,600 Speaker 7: Yeah, I think that makes a lot of sense, right, 165 00:07:43,640 --> 00:07:46,440 Speaker 7: the market being an important signal, an important source of 166 00:07:46,520 --> 00:07:49,440 Speaker 7: data for the FED instead of this kind of manipulation. 167 00:07:49,560 --> 00:07:52,360 Speaker 7: It is really hard, though, as market participants not to 168 00:07:52,360 --> 00:07:55,040 Speaker 7: try and to anticipate what other market participants or other 169 00:07:55,040 --> 00:07:58,440 Speaker 7: policy makers or other people making decisions are doing or 170 00:07:58,440 --> 00:08:01,440 Speaker 7: interpreting with the data. And that is part of the 171 00:08:01,480 --> 00:08:03,360 Speaker 7: game and part of the behavioral side of things that 172 00:08:03,360 --> 00:08:06,240 Speaker 7: we all incorporate into our process. But I think, you know, 173 00:08:06,920 --> 00:08:10,640 Speaker 7: Chairworsh's point was very clear that the market and that mechanism, Jim, 174 00:08:10,680 --> 00:08:13,120 Speaker 7: as you're pointing out, is a really powerful mechanism and 175 00:08:13,160 --> 00:08:14,760 Speaker 7: we shouldn't fait it right now. 176 00:08:14,960 --> 00:08:16,880 Speaker 3: We want to get back with a part of the 177 00:08:16,960 --> 00:08:17,559 Speaker 3: task force. 178 00:08:17,600 --> 00:08:19,600 Speaker 4: I don't believe he actually has been appointed to a 179 00:08:19,640 --> 00:08:22,480 Speaker 4: task force. He is officially the Bloomberg Task Force on 180 00:08:22,520 --> 00:08:24,600 Speaker 4: the federers or of Bloomberg's Michael McKee, You are in 181 00:08:24,880 --> 00:08:28,240 Speaker 4: the room, and the press conference actually went on a 182 00:08:28,240 --> 00:08:32,319 Speaker 4: little bit longer than some people had expected. The commitment 183 00:08:32,360 --> 00:08:35,600 Speaker 4: to a press conference, though not exactly concrete. His answer 184 00:08:35,600 --> 00:08:37,920 Speaker 4: to you is really interesting. What was your takeaway from 185 00:08:37,920 --> 00:08:38,560 Speaker 4: this conference? 186 00:08:39,760 --> 00:08:41,959 Speaker 10: Well, the answer, of course, like almost all of his answers, 187 00:08:42,080 --> 00:08:44,480 Speaker 10: ended with there's a task force for that. But basically 188 00:08:44,520 --> 00:08:48,160 Speaker 10: they're going to look at all communications, and he did 189 00:08:48,240 --> 00:08:51,319 Speaker 10: express the idea that he doesn't necessarily think you should 190 00:08:51,360 --> 00:08:54,520 Speaker 10: have a press conference after every meeting if you don't 191 00:08:54,559 --> 00:08:56,880 Speaker 10: have something to say now, that's going to be the 192 00:08:56,920 --> 00:08:58,680 Speaker 10: thing that the task force is going to have to 193 00:08:58,720 --> 00:09:03,040 Speaker 10: look at, is what qualified is something important to say today? Obviously, 194 00:09:03,440 --> 00:09:06,400 Speaker 10: but if you're in a situation where you don't know 195 00:09:06,440 --> 00:09:08,600 Speaker 10: where inflation's going, where you're going to vote the whole 196 00:09:08,720 --> 00:09:13,200 Speaker 10: rates where they are, does that require a meet a 197 00:09:13,240 --> 00:09:16,280 Speaker 10: press conference? If not, then how do the markets react? 198 00:09:16,320 --> 00:09:19,200 Speaker 10: The FED there is kind of leading the markets, and 199 00:09:19,240 --> 00:09:21,400 Speaker 10: if they come to you and say, hey, come on over, 200 00:09:21,440 --> 00:09:23,839 Speaker 10: we're gonna have a press conference today, then they're also 201 00:09:23,960 --> 00:09:28,160 Speaker 10: leading the markets. So it's a difficult needle to thread 202 00:09:28,240 --> 00:09:28,920 Speaker 10: at this point. 203 00:09:29,040 --> 00:09:31,000 Speaker 2: I think for Walsh to. 204 00:09:30,920 --> 00:09:32,760 Speaker 10: Try to get out of this, to put that genie 205 00:09:32,760 --> 00:09:36,120 Speaker 10: back in the bottle. But we'll see what the task 206 00:09:36,160 --> 00:09:40,480 Speaker 10: force comes up with. He was very, very complimentary of 207 00:09:40,559 --> 00:09:44,760 Speaker 10: Fed officials today, and he basically framed this all as 208 00:09:44,800 --> 00:09:47,360 Speaker 10: we're all working together to make this work better for 209 00:09:47,440 --> 00:09:51,080 Speaker 10: monetary policy. So it's going to be we're all going 210 00:09:51,160 --> 00:09:54,040 Speaker 10: to be sitting back and waiting for these task force reports. 211 00:09:53,640 --> 00:09:54,160 Speaker 2: To come out. 212 00:09:54,440 --> 00:09:57,160 Speaker 4: Michael McKee, thanks so much for all of your work 213 00:09:57,200 --> 00:09:58,320 Speaker 4: and insight today. 214 00:09:58,640 --> 00:09:59,520 Speaker 3: Just real quick here. 215 00:09:59,640 --> 00:10:02,120 Speaker 4: It does see him alike the market he's not necessarily 216 00:10:02,160 --> 00:10:04,800 Speaker 4: paying attention to. In the initial salvos of the reaction, 217 00:10:05,280 --> 00:10:07,679 Speaker 4: he went on and said, honestly, I'm not that concerned 218 00:10:07,679 --> 00:10:10,880 Speaker 4: in the first hours that said, the idea that they 219 00:10:10,960 --> 00:10:14,160 Speaker 4: dropped any kind of commentary on the labor market, and 220 00:10:14,200 --> 00:10:16,520 Speaker 4: the fact that he said we've missed for five years 221 00:10:16,559 --> 00:10:17,760 Speaker 4: our inflation target and we. 222 00:10:17,760 --> 00:10:18,720 Speaker 3: Are going to fix that. 223 00:10:19,240 --> 00:10:22,280 Speaker 4: Is there any other way to interpret this other kate 224 00:10:22,480 --> 00:10:24,199 Speaker 4: than unabashedly hawkish. 225 00:10:24,360 --> 00:10:26,120 Speaker 9: I mean, look, here's what I would say. 226 00:10:26,120 --> 00:10:28,640 Speaker 7: The fact that he repeated that we have been overshooting 227 00:10:28,640 --> 00:10:30,880 Speaker 7: the target for five years, something our team talks. 228 00:10:30,640 --> 00:10:31,679 Speaker 9: About all of the time. 229 00:10:32,480 --> 00:10:35,240 Speaker 7: I thought was incredibly important and actually was a comfort 230 00:10:35,280 --> 00:10:37,600 Speaker 7: to me, this acknowledgment that policy is going to be 231 00:10:38,040 --> 00:10:40,640 Speaker 7: really active in terms of getting us to the goal. 232 00:10:40,800 --> 00:10:43,079 Speaker 7: I thought that other comedy made around paying attention to 233 00:10:43,120 --> 00:10:46,000 Speaker 7: the left of the decimal point versus the right, that 234 00:10:46,600 --> 00:10:50,840 Speaker 7: the target is two, not too in something sort of 235 00:10:50,880 --> 00:10:53,360 Speaker 7: reaffirms that commitment and the way that he'll work with 236 00:10:53,400 --> 00:10:55,960 Speaker 7: the Committee frankly to get policy in a place that 237 00:10:56,000 --> 00:10:59,800 Speaker 7: we go closer to target over time. So it's hard 238 00:10:59,840 --> 00:11:03,080 Speaker 7: not to interpret that where we are today as a 239 00:11:03,080 --> 00:11:06,520 Speaker 7: little bit more hawkish than otherwise people might have expected. 240 00:11:06,840 --> 00:11:09,840 Speaker 6: But also that's thinking perhaps more clearly than perhaps what 241 00:11:09,880 --> 00:11:12,079 Speaker 6: we had heard in the past. Right, there's no two issh, 242 00:11:12,120 --> 00:11:15,079 Speaker 6: it's just two. And he's happy with that. I'm curious. 243 00:11:15,160 --> 00:11:17,679 Speaker 6: In terms of the labor market, there was a question 244 00:11:17,760 --> 00:11:20,320 Speaker 6: posed about what the Committee thinks of the labor market Jim, 245 00:11:20,360 --> 00:11:22,440 Speaker 6: and he said trends matter more than data points. The 246 00:11:22,520 --> 00:11:24,160 Speaker 6: job data has been moving in a good direction. It 247 00:11:24,160 --> 00:11:26,200 Speaker 6: feels like that's all he said about the labor market. 248 00:11:26,200 --> 00:11:28,199 Speaker 6: He's not concerned with it one way or another. 249 00:11:28,400 --> 00:11:30,120 Speaker 8: Yeah, And if you go back to the statement, they 250 00:11:30,120 --> 00:11:32,120 Speaker 8: didn't put anything in the statement in the one question 251 00:11:32,200 --> 00:11:34,000 Speaker 8: he said, we're not worried about the labor market. 252 00:11:34,040 --> 00:11:35,760 Speaker 2: Okay, that is not a problem. 253 00:11:35,800 --> 00:11:38,920 Speaker 8: The problem seems to be the inflation problem, and that's 254 00:11:38,960 --> 00:11:42,120 Speaker 8: what they addressed. So I almost suspect that this statement 255 00:11:42,160 --> 00:11:45,560 Speaker 8: is going to be flexible. So today, now it's inflation. 256 00:11:45,960 --> 00:11:48,920 Speaker 8: I could see a statement in you know, six months 257 00:11:48,960 --> 00:11:51,440 Speaker 8: a year where there's no mention of inflation and it's 258 00:11:51,520 --> 00:11:54,360 Speaker 8: all about the labor market, it's all about real growth. 259 00:11:54,040 --> 00:11:55,760 Speaker 4: Then at that point, Yeah, and he said that it 260 00:11:55,760 --> 00:11:58,720 Speaker 4: wasn't necessarily in conflict with each other. Right now, let's 261 00:11:58,720 --> 00:12:01,240 Speaker 4: bring in Stephanie Rotha Research, who's been listening to all 262 00:12:01,240 --> 00:12:03,440 Speaker 4: of this. Stephanie, your first take and what we just 263 00:12:03,520 --> 00:12:04,960 Speaker 4: heard from fed share Kevin. 264 00:12:04,720 --> 00:12:07,720 Speaker 11: Worsh Yeah, I mean it was he's setting up to 265 00:12:07,760 --> 00:12:10,040 Speaker 11: be a very credible fed He seems to be very 266 00:12:10,040 --> 00:12:13,280 Speaker 11: smart about getting everybody on his side and getting the consensus. 267 00:12:13,320 --> 00:12:15,920 Speaker 11: It seems well he was not in favor of a 268 00:12:16,000 --> 00:12:19,400 Speaker 11: hike today. You know, that could very much change with 269 00:12:19,480 --> 00:12:22,320 Speaker 11: the incoming data. So it was certainly more hawkish than 270 00:12:22,480 --> 00:12:24,400 Speaker 11: what some people had thought. Some people thought he would 271 00:12:24,440 --> 00:12:27,360 Speaker 11: just come in and try to push through rake cuts, 272 00:12:27,400 --> 00:12:29,760 Speaker 11: because that's what the president wants, and that wouldn't necessarily, 273 00:12:29,800 --> 00:12:32,400 Speaker 11: quite frankly, be very good for markets anyway. So this 274 00:12:32,559 --> 00:12:34,760 Speaker 11: was a very deliberate and patient approach, and we'll see, 275 00:12:35,000 --> 00:12:37,520 Speaker 11: you know, through the path of incoming data how this plays. 276 00:12:37,520 --> 00:12:40,199 Speaker 11: At our base case is that inflation will cool enough, 277 00:12:40,280 --> 00:12:42,960 Speaker 11: labor market will show some signs of softening such that 278 00:12:43,280 --> 00:12:45,120 Speaker 11: in the coming weeks they don't actually have to hike. 279 00:12:45,200 --> 00:12:47,400 Speaker 11: But certainly the odds have risen after this. 280 00:12:47,400 --> 00:12:48,240 Speaker 5: Meeting, Stephanie. 281 00:12:48,280 --> 00:12:50,680 Speaker 6: Does this silence the critics who thought that we would 282 00:12:50,720 --> 00:12:53,959 Speaker 6: not have an independent FED under Kevin worsh Yes. 283 00:12:53,760 --> 00:12:56,880 Speaker 11: I think it absolutely does. He is, you know, looking 284 00:12:56,880 --> 00:12:59,160 Speaker 11: at the incoming data. He doesn't seem to be somebody 285 00:12:59,160 --> 00:13:02,560 Speaker 11: who was scared to be hiking if we don't actually 286 00:13:02,640 --> 00:13:05,400 Speaker 11: get closer to the inflation goal than would otherwise be 287 00:13:05,440 --> 00:13:08,000 Speaker 11: the case. He doesn't seem to be giving way to 288 00:13:08,040 --> 00:13:10,040 Speaker 11: any sort of pressure. So I mean that's a very 289 00:13:10,040 --> 00:13:12,760 Speaker 11: good thing for markets. The markets should want an independent FED. 290 00:13:13,000 --> 00:13:16,000 Speaker 11: So just pushing through rates for the sake of appeasing 291 00:13:16,040 --> 00:13:19,840 Speaker 11: the president is not something that will ultimately result in 292 00:13:20,040 --> 00:13:21,920 Speaker 11: a better economy or markets at the end of the day. 293 00:13:21,960 --> 00:13:23,640 Speaker 11: And I think we should all feel better about that 294 00:13:23,880 --> 00:13:24,800 Speaker 11: after what we heard today. 295 00:13:25,040 --> 00:13:28,760 Speaker 6: How do you anticipate economists to respond or to react 296 00:13:28,760 --> 00:13:31,240 Speaker 6: to the fact that nine of the members want a hike? 297 00:13:31,320 --> 00:13:33,360 Speaker 6: I mean, how is this going to adjust what Wall 298 00:13:33,360 --> 00:13:35,080 Speaker 6: Street thinks is going to happen with inflation? 299 00:13:35,920 --> 00:13:37,880 Speaker 11: Yeah, and you're seeing that in markets today. You know, 300 00:13:38,000 --> 00:13:41,520 Speaker 11: the shorter end of the curve rates are significantly and 301 00:13:41,559 --> 00:13:43,640 Speaker 11: you have to raise your odds of a near term hike. 302 00:13:44,160 --> 00:13:49,200 Speaker 11: Knowing that many more FOMC members than was generally expected 303 00:13:49,280 --> 00:13:51,600 Speaker 11: or looking for a hike before this meeting, I would 304 00:13:51,600 --> 00:13:54,120 Speaker 11: say somewhere between. The expectation was somewhere between three and 305 00:13:54,160 --> 00:13:56,280 Speaker 11: six members were expected to be penciling in a hike. 306 00:13:56,559 --> 00:13:59,440 Speaker 11: Now you're substantially above that. So now we're talking about 307 00:13:59,480 --> 00:14:02,520 Speaker 11: about half the many is very much interested in hiking 308 00:14:02,559 --> 00:14:05,240 Speaker 11: rates given the data that we have today. So whatever 309 00:14:05,280 --> 00:14:08,560 Speaker 11: your odds were of a hike you know before today, 310 00:14:08,679 --> 00:14:11,160 Speaker 11: you know it certainly has to be to be rising. 311 00:14:10,960 --> 00:14:13,560 Speaker 4: If you are just joining us. We're parsing through a 312 00:14:13,720 --> 00:14:17,559 Speaker 4: very noteworthy FED meeting, the first for Kevin worsh as chairman, 313 00:14:17,960 --> 00:14:19,520 Speaker 4: and he made a lot of changes. 314 00:14:19,720 --> 00:14:21,240 Speaker 3: I did want to make one correction. 315 00:14:21,440 --> 00:14:23,200 Speaker 4: I said that there were one hundred and seventy five 316 00:14:23,240 --> 00:14:25,840 Speaker 4: words in the April statement. It was actually three hundred 317 00:14:25,880 --> 00:14:28,440 Speaker 4: and forty one words versus the one hundred and thirty 318 00:14:28,440 --> 00:14:31,720 Speaker 4: one words in this latest statement. As we've been mentioning 319 00:14:31,760 --> 00:14:34,480 Speaker 4: in markets, you can see a real hawkish tilt that 320 00:14:34,560 --> 00:14:38,400 Speaker 4: is filtering through markets. I'm wondering, Jim, from your perspective, 321 00:14:38,400 --> 00:14:40,800 Speaker 4: do you like long bonds better given what we just heard? 322 00:14:40,840 --> 00:14:42,120 Speaker 3: I mean, does this actually give you. 323 00:14:42,040 --> 00:14:44,880 Speaker 4: More confidence that this is a federal reserve that wants 324 00:14:44,920 --> 00:14:47,360 Speaker 4: to anchor inflation expectations at. 325 00:14:47,240 --> 00:14:49,360 Speaker 3: Two point zho not two points something? 326 00:14:49,640 --> 00:14:52,360 Speaker 8: It should The old Wall Street adage that as a 327 00:14:52,400 --> 00:14:56,200 Speaker 8: bond investor, I can stop panicking when the FED starts 328 00:14:56,280 --> 00:15:00,760 Speaker 8: panicking really applies. If the FED is going to vigilant 329 00:15:00,840 --> 00:15:04,040 Speaker 8: about inflation, that in all of it self should be 330 00:15:04,120 --> 00:15:07,080 Speaker 8: positive for bonds. Now today it's positive for bonds with 331 00:15:07,120 --> 00:15:10,080 Speaker 8: the yield curve flattening because they're not rising and yield as. 332 00:15:10,080 --> 00:15:11,320 Speaker 2: Much as the front end of the curve. 333 00:15:11,680 --> 00:15:13,480 Speaker 8: But yes, you know, if you want to go back 334 00:15:13,480 --> 00:15:16,160 Speaker 8: to twenty twenty two, to give another example, the infliction 335 00:15:16,280 --> 00:15:18,640 Speaker 8: rate hit nine percent, but with the FED raising rates 336 00:15:18,640 --> 00:15:20,160 Speaker 8: seventy five basis points of her meeting. 337 00:15:20,400 --> 00:15:22,920 Speaker 2: It never got above four and a quarter the entire year. 338 00:15:23,600 --> 00:15:25,360 Speaker 2: The FED was in full panic mode. 339 00:15:25,600 --> 00:15:28,320 Speaker 8: Bond investors on a relative base is held in Kate. 340 00:15:28,360 --> 00:15:31,280 Speaker 7: You agree, ah man, we have been very underweight duration 341 00:15:31,560 --> 00:15:34,000 Speaker 7: for like the duration of my time here in the city, 342 00:15:34,240 --> 00:15:37,240 Speaker 7: to be fair, and we have debated over and over again, 343 00:15:37,320 --> 00:15:39,240 Speaker 7: what is it going to be that lets us kind 344 00:15:39,240 --> 00:15:42,440 Speaker 7: of extend duration in portfolios? But I just can't get there. 345 00:15:42,480 --> 00:15:44,080 Speaker 7: I mean, our view as at inflation is going to 346 00:15:44,120 --> 00:15:46,920 Speaker 7: be more persistent and broader than a lot of people 347 00:15:46,960 --> 00:15:50,600 Speaker 7: expected for quarters to come. So even against that backdrop, 348 00:15:50,640 --> 00:15:53,680 Speaker 7: against the comments from I'm chair warsh and from kind 349 00:15:53,680 --> 00:15:55,840 Speaker 7: of the tone of the FMC, you know, we're just 350 00:15:55,880 --> 00:15:57,640 Speaker 7: not in a place yet more we're buyers. 351 00:15:58,440 --> 00:16:01,080 Speaker 6: How does this make you think about credit? Would you 352 00:16:01,160 --> 00:16:03,960 Speaker 6: be changing any of your allocation to it or what 353 00:16:04,040 --> 00:16:04,480 Speaker 6: you prefer? 354 00:16:04,760 --> 00:16:06,440 Speaker 7: Yeah, we think about credit a course in the risk 355 00:16:06,480 --> 00:16:08,800 Speaker 7: asset spectrum too, not just in terms of yield. Right, 356 00:16:08,840 --> 00:16:12,520 Speaker 7: And in this case, you know, equities, not credit, have 357 00:16:12,680 --> 00:16:15,200 Speaker 7: had kind of a step down in valuation over the 358 00:16:15,240 --> 00:16:17,640 Speaker 7: course of twenty twenty six because of course earnings have 359 00:16:17,680 --> 00:16:19,680 Speaker 7: been much stronger than the price movement. 360 00:16:19,840 --> 00:16:21,600 Speaker 3: And so you know, we're still close to. 361 00:16:21,560 --> 00:16:24,280 Speaker 7: That kind of fifteen year high in terms of credit valuations, 362 00:16:24,320 --> 00:16:27,200 Speaker 7: but we've come, you know, significantly lower in equities before 363 00:16:27,240 --> 00:16:31,080 Speaker 7: to take our risk asset exposure inequities over credit. We've 364 00:16:31,120 --> 00:16:33,280 Speaker 7: positioned that way over the course of the year. That 365 00:16:33,280 --> 00:16:34,880 Speaker 7: doesn't mean no credit, but we just want to be 366 00:16:34,880 --> 00:16:37,800 Speaker 7: more selective frankly, and I wish I didn't just love 367 00:16:37,800 --> 00:16:40,000 Speaker 7: equities so much and think they're going to go higher. 368 00:16:40,080 --> 00:16:42,160 Speaker 9: Actually a pause to breathe. 369 00:16:42,240 --> 00:16:44,440 Speaker 7: I think, as we've seen over some last trading sessions, 370 00:16:44,480 --> 00:16:47,360 Speaker 7: is a good thing going into the summer. But I 371 00:16:47,400 --> 00:16:50,400 Speaker 7: also wish I could use fixingco more actively in portfolios. 372 00:16:50,400 --> 00:16:53,240 Speaker 7: But given where we are on rates and inflation, as 373 00:16:53,280 --> 00:16:54,800 Speaker 7: I said, we're very underweight duration. 374 00:16:55,400 --> 00:16:58,160 Speaker 6: Staying on that idea, we also heard from Kevin worsh 375 00:16:58,520 --> 00:17:01,840 Speaker 6: Stuffanie about his thought on how restrictive policy is right now, 376 00:17:01,840 --> 00:17:04,240 Speaker 6: and his answer was it's uneven. If you look at housing, 377 00:17:04,280 --> 00:17:07,439 Speaker 6: for instance, FED policy does appears restrictive because you have 378 00:17:07,480 --> 00:17:10,160 Speaker 6: that affordability crisis, not just in the actual housing crisis, 379 00:17:10,200 --> 00:17:12,760 Speaker 6: but in mortgage rates. But he doesn't see that in 380 00:17:12,840 --> 00:17:16,159 Speaker 6: financial markets, noting the record highs that we're seeing inequities 381 00:17:16,160 --> 00:17:17,679 Speaker 6: and the tight spreads that we see in credit. 382 00:17:17,800 --> 00:17:18,679 Speaker 5: How do you think about that? 383 00:17:19,960 --> 00:17:22,719 Speaker 11: Yeah, I mean, so you know, the initial idea, well, 384 00:17:23,200 --> 00:17:26,320 Speaker 11: policy is somewhat uneven. You could initially be interpreted as well, 385 00:17:26,359 --> 00:17:29,040 Speaker 11: that's somewhat of a dubbish comment until he later said, 386 00:17:29,080 --> 00:17:32,080 Speaker 11: you don't really see anywhere outside of housing, So it's 387 00:17:32,160 --> 00:17:36,119 Speaker 11: pointing to that is policy is largely, you know, not 388 00:17:36,240 --> 00:17:38,919 Speaker 11: that restrictive outside of one sector of the economy. So 389 00:17:39,160 --> 00:17:42,639 Speaker 11: once you hear that further information, it suggests that, you know, 390 00:17:42,920 --> 00:17:46,560 Speaker 11: the the economy is certainly running fairly hot relative to 391 00:17:46,760 --> 00:17:49,199 Speaker 11: to sort of where rates are. So, you know, our 392 00:17:49,240 --> 00:17:52,960 Speaker 11: expectation is that was a you know, somewhat somewhat hawkish 393 00:17:53,240 --> 00:17:56,679 Speaker 11: comment after you know, you could initially have been interpreted 394 00:17:56,840 --> 00:17:58,320 Speaker 11: as a little bit more balanced. 395 00:17:58,760 --> 00:18:02,720 Speaker 4: We heard him say confidently Stephanie that he was not 396 00:18:02,760 --> 00:18:04,800 Speaker 4: concerned with how the market was moving in the initial 397 00:18:04,840 --> 00:18:08,000 Speaker 4: aftermath of this press conference. He wouldn't make too much 398 00:18:08,000 --> 00:18:08,760 Speaker 4: of those moves. 399 00:18:08,800 --> 00:18:10,120 Speaker 3: Do you think that that was a mistake. 400 00:18:12,119 --> 00:18:13,560 Speaker 11: No, I mean, I think I think he believes that. 401 00:18:13,640 --> 00:18:15,800 Speaker 11: I think he you know, he he came out and 402 00:18:15,840 --> 00:18:19,280 Speaker 11: delivered a message of you know, credibility, and the market 403 00:18:19,359 --> 00:18:21,879 Speaker 11: is seeing seeing through that. I don't think that was 404 00:18:23,040 --> 00:18:25,240 Speaker 11: something he would wish, you know, wishes wishes, he didn't 405 00:18:25,240 --> 00:18:27,520 Speaker 11: say necessarily. He knew he was going to be coming 406 00:18:27,520 --> 00:18:30,040 Speaker 11: out and delivering, you know, a balance, all though perhaps 407 00:18:30,040 --> 00:18:32,440 Speaker 11: somewhat hawkish message, and that's exactly what he did today. 408 00:18:32,680 --> 00:18:36,040 Speaker 11: He came in there, he painted the FED is a 409 00:18:36,119 --> 00:18:39,879 Speaker 11: very credible institution, one that's working together. He noted, you 410 00:18:39,960 --> 00:18:42,240 Speaker 11: know several times that you know, while they might have 411 00:18:42,320 --> 00:18:44,119 Speaker 11: sort of family FEUs at the table, they're going to 412 00:18:44,119 --> 00:18:47,280 Speaker 11: come out and deliver you know, an important and singular message. 413 00:18:47,280 --> 00:18:49,440 Speaker 11: And that's exactly what he did. So I think he 414 00:18:49,640 --> 00:18:52,240 Speaker 11: you know, came and went exactly as his plan, and 415 00:18:52,240 --> 00:18:53,800 Speaker 11: I think he was very successful in doing so. 416 00:18:54,040 --> 00:18:57,159 Speaker 4: Stephanie just sort of a similar question to what we 417 00:18:57,160 --> 00:18:59,959 Speaker 4: were asking before about whether this gives you more confident 418 00:19:00,040 --> 00:19:02,399 Speaker 4: and some long bonds. Does this make you actually pulled 419 00:19:02,400 --> 00:19:06,159 Speaker 4: down your longer term inflation expectations for the United States 420 00:19:06,600 --> 00:19:08,720 Speaker 4: based on some of the shift and rhetoric. 421 00:19:09,720 --> 00:19:11,760 Speaker 11: Yeah, I think it has to. You know that the 422 00:19:11,800 --> 00:19:14,720 Speaker 11: FED is going to be credible on getting inflation down, 423 00:19:15,359 --> 00:19:17,879 Speaker 11: the market should and we also do take him at 424 00:19:17,880 --> 00:19:20,520 Speaker 11: his word that they are. He's he's planning on getting 425 00:19:20,520 --> 00:19:23,879 Speaker 11: inflation down one way or another. The hope or the 426 00:19:23,880 --> 00:19:26,639 Speaker 11: expectation is you'll get it down through the passage of 427 00:19:26,680 --> 00:19:30,119 Speaker 11: time and inflation naturally coming down because there have been 428 00:19:30,160 --> 00:19:33,960 Speaker 11: shocked to the economy that should eventually fade. But if 429 00:19:33,960 --> 00:19:36,160 Speaker 11: we don't, if that doesn't play out that way, then 430 00:19:36,520 --> 00:19:38,800 Speaker 11: Warsh is certainly going to be behind the Fed hiking 431 00:19:38,840 --> 00:19:40,400 Speaker 11: rates in order to get there. So there are two 432 00:19:40,480 --> 00:19:43,040 Speaker 11: paths to get there, but the end goal is certainly 433 00:19:43,080 --> 00:19:44,760 Speaker 11: going to be that two percent inflation. He very much 434 00:19:44,800 --> 00:19:45,359 Speaker 11: made that clear. 435 00:19:45,560 --> 00:19:48,000 Speaker 3: Stephanie ro thank you so much for your insights. 436 00:19:48,240 --> 00:19:50,760 Speaker 6: Just to go back to what President Trump said, he 437 00:19:50,840 --> 00:19:54,119 Speaker 6: was answering a question from our Josh Wingrove about what 438 00:19:54,200 --> 00:19:56,880 Speaker 6: happened with the FED, and his exact quote was, it's 439 00:19:56,880 --> 00:19:59,159 Speaker 6: all right whatever when asked about the Fed's decision to 440 00:19:59,160 --> 00:20:00,000 Speaker 6: hold interest rates stuff. 441 00:20:00,320 --> 00:20:01,000 Speaker 3: Well, there you go. 442 00:20:01,119 --> 00:20:03,480 Speaker 4: It got the endorsement, I guess of the President of 443 00:20:03,480 --> 00:20:05,080 Speaker 4: the United States. Ship do you think that yield kurt 444 00:20:05,080 --> 00:20:06,640 Speaker 4: flattening is the path of travel from here? 445 00:20:06,840 --> 00:20:07,040 Speaker 11: Yeah. 446 00:20:07,280 --> 00:20:10,080 Speaker 8: If the FED is going to be committed to raising 447 00:20:10,160 --> 00:20:13,480 Speaker 8: rates to fighting inflation, the long end again, as they said, 448 00:20:13,520 --> 00:20:16,199 Speaker 8: on a relative basis, should like it more than the 449 00:20:16,240 --> 00:20:18,480 Speaker 8: front end. Front end yields go up. Long end yields 450 00:20:18,560 --> 00:20:20,160 Speaker 8: kind of hold steady or go up a little bit, 451 00:20:20,440 --> 00:20:23,240 Speaker 8: and you get that FED or you get that Kurt 452 00:20:23,280 --> 00:20:25,480 Speaker 8: flattening Kate, What will. 453 00:20:25,359 --> 00:20:26,879 Speaker 6: You be looking for in the FED minutes when those 454 00:20:26,920 --> 00:20:27,920 Speaker 6: come out in three weeks? 455 00:20:28,200 --> 00:20:30,520 Speaker 7: I mean, I guess I'll be looking for that one 456 00:20:30,760 --> 00:20:33,680 Speaker 7: small tiny bit of discussion for the person who was 457 00:20:33,720 --> 00:20:36,280 Speaker 7: suggesting that there would be space for a rate cut. 458 00:20:36,720 --> 00:20:39,120 Speaker 7: ID love to see kind of how fast that discussion 459 00:20:39,160 --> 00:20:41,840 Speaker 7: laws or how it's addressed. I'll also be you know, 460 00:20:42,000 --> 00:20:44,760 Speaker 7: kind of thinking about overall fleetion expectations. This is something 461 00:20:45,000 --> 00:20:46,560 Speaker 7: we want to see. You know, how does the FED 462 00:20:46,640 --> 00:20:48,679 Speaker 7: talk about that? Are they going to be acknowledging if 463 00:20:48,680 --> 00:20:51,600 Speaker 7: we care a lot more about market pricing? You know 464 00:20:51,640 --> 00:20:54,399 Speaker 7: how that reflects back in terms of their overall debate. 465 00:20:54,840 --> 00:20:56,480 Speaker 7: But in general, I think we already know what we 466 00:20:56,560 --> 00:20:58,520 Speaker 7: need to know, which is like, this was a split 467 00:20:59,040 --> 00:21:02,439 Speaker 7: set of decisions the people with varying different degrees of 468 00:21:02,480 --> 00:21:06,880 Speaker 7: interpretation of the inflation data and the economy, how tight 469 00:21:06,920 --> 00:21:09,120 Speaker 7: financial conditions are, how much we need to worry about 470 00:21:09,119 --> 00:21:11,480 Speaker 7: break events. I mean, no, it's all over the map, 471 00:21:11,520 --> 00:21:12,800 Speaker 7: so I'm not sure we're going to get a single 472 00:21:12,840 --> 00:21:15,640 Speaker 7: cohesive special message from the minutes if. 473 00:21:15,560 --> 00:21:16,639 Speaker 2: I jump in on that. 474 00:21:17,240 --> 00:21:20,040 Speaker 8: There's one other thing that we haven't discussed. The FED 475 00:21:20,080 --> 00:21:22,680 Speaker 8: didn't disclose their vote for the first time ever. 476 00:21:22,760 --> 00:21:24,040 Speaker 2: They didn't tell us. 477 00:21:23,960 --> 00:21:25,919 Speaker 5: Whether it was a twelve zero vote or if there was. 478 00:21:25,920 --> 00:21:27,240 Speaker 2: Any dissenter design. 479 00:21:27,520 --> 00:21:30,040 Speaker 8: Yes, by design, So maybe we'll get that out of 480 00:21:30,080 --> 00:21:32,359 Speaker 8: the minutes. But if we don't get it out of 481 00:21:32,400 --> 00:21:36,280 Speaker 8: the minutes, they're going full ECB, which never discloses their vote, 482 00:21:36,680 --> 00:21:40,200 Speaker 8: and that says to me the fed's more independent that 483 00:21:40,320 --> 00:21:43,040 Speaker 8: there's twelve voters across that table, and they don't want 484 00:21:43,080 --> 00:21:45,640 Speaker 8: to be publishing seventy five votes eighty four votes having 485 00:21:45,640 --> 00:21:46,600 Speaker 8: all these descents. 486 00:21:46,800 --> 00:21:48,440 Speaker 2: So, as he said, they'd rather keep it as. 487 00:21:48,400 --> 00:21:50,680 Speaker 8: A family fight, let them all hash it out in 488 00:21:50,720 --> 00:21:53,000 Speaker 8: the meeting, and then come out with a decision later on, 489 00:21:53,359 --> 00:21:56,440 Speaker 8: and not have to have people put out statements two 490 00:21:56,520 --> 00:21:59,159 Speaker 8: days later about why they dissented for these meetings, So 491 00:21:59,160 --> 00:22:00,800 Speaker 8: it's going to be very different thing, and maybe the 492 00:22:00,800 --> 00:22:02,240 Speaker 8: minutes will help de sign that. 493 00:22:02,560 --> 00:22:04,720 Speaker 6: Let's not forget that Jay Powell was part of the discussion. 494 00:22:04,800 --> 00:22:06,439 Speaker 6: He was in the room because he's a member of 495 00:22:06,440 --> 00:22:08,520 Speaker 6: the FED board, even though he's no longer the FED chair, 496 00:22:08,520 --> 00:22:10,920 Speaker 6: which is a highly unusual Lisa, you has to. 497 00:22:10,880 --> 00:22:15,040 Speaker 4: Wonder exactly what's so broken and whether he personally feels 498 00:22:15,119 --> 00:22:17,359 Speaker 4: a little bit of attachment to the old way of communication, 499 00:22:17,560 --> 00:22:21,280 Speaker 4: given that he was really helming that right now, I 500 00:22:21,320 --> 00:22:23,400 Speaker 4: do want to bring in Jeffrey Rosenberg of black Rock. 501 00:22:23,560 --> 00:22:24,679 Speaker 3: There is a sense right. 502 00:22:24,560 --> 00:22:27,239 Speaker 4: Now in markets that this is a FED that is 503 00:22:27,280 --> 00:22:32,520 Speaker 4: newly renewed, really newly renewing their commitment to controlling inflation, clearly, 504 00:22:32,600 --> 00:22:35,320 Speaker 4: yield curve flattening, clearly risk off and stocks. 505 00:22:35,680 --> 00:22:37,359 Speaker 3: Is this signal or is this noise? 506 00:22:39,920 --> 00:22:41,760 Speaker 2: Well, there's there's a lot of both. 507 00:22:41,840 --> 00:22:45,000 Speaker 12: This is quite the change, and I think we're all 508 00:22:45,040 --> 00:22:49,000 Speaker 12: trying to digest what we just heard. 509 00:22:49,240 --> 00:22:50,640 Speaker 2: I think there's a real risk here. 510 00:22:51,440 --> 00:22:53,439 Speaker 12: Jonathan's not on the program, so I'm going to do 511 00:22:53,480 --> 00:22:54,800 Speaker 12: my best interpretation. 512 00:22:54,960 --> 00:22:56,480 Speaker 2: The first reaction is. 513 00:22:56,440 --> 00:23:01,280 Speaker 12: Not always the right reaction, and I think there's a 514 00:23:01,359 --> 00:23:04,840 Speaker 12: risk here of overplaying the yield curve flattening and the 515 00:23:04,920 --> 00:23:07,440 Speaker 12: questioning of the long end that I'm listening to here. 516 00:23:07,600 --> 00:23:09,919 Speaker 12: So first of all, you know, this is a market 517 00:23:09,960 --> 00:23:13,560 Speaker 12: that is sort of split between the old reaction function, 518 00:23:13,960 --> 00:23:17,960 Speaker 12: which really moved on the dot plot. Right, the nine votes, 519 00:23:18,880 --> 00:23:22,359 Speaker 12: the nine dots voting for a hike were well in 520 00:23:22,480 --> 00:23:27,000 Speaker 12: excessive expectations, and that's what moved the market. But then 521 00:23:27,040 --> 00:23:30,479 Speaker 12: you have Warsh basically telling you we're going to get 522 00:23:30,560 --> 00:23:33,280 Speaker 12: rid of the dot plot. I mean, he got you 523 00:23:33,359 --> 00:23:35,520 Speaker 12: all the way. They almost to the goal line, but 524 00:23:35,720 --> 00:23:38,920 Speaker 12: it didn't want to, you know, pre judge the outcome 525 00:23:38,960 --> 00:23:41,320 Speaker 12: of the of the task force. But it's very clear, 526 00:23:41,760 --> 00:23:45,479 Speaker 12: you know, the task force has its job ahead of it, 527 00:23:46,640 --> 00:23:50,120 Speaker 12: so that underminds a little bit of that interpretation. 528 00:23:50,280 --> 00:23:52,320 Speaker 2: I think the second reaction from the. 529 00:23:52,240 --> 00:23:55,040 Speaker 12: Market is just a very clear hawkish statement. 530 00:23:55,720 --> 00:23:56,920 Speaker 2: But I think here. 531 00:23:58,600 --> 00:24:01,520 Speaker 12: There's the possibility here that the market may want to 532 00:24:01,520 --> 00:24:05,360 Speaker 12: rethink or all I'm rethinking. Not I'm talking about the market, 533 00:24:05,520 --> 00:24:08,240 Speaker 12: but you know, is this hawkish for rates? Or is 534 00:24:08,280 --> 00:24:11,240 Speaker 12: this hawkish for the balance sheet? Because if you look 535 00:24:11,440 --> 00:24:14,320 Speaker 12: underneath what he said, there were some very kind of 536 00:24:14,440 --> 00:24:18,800 Speaker 12: telling interchanges there. And when you think about the pat 537 00:24:18,840 --> 00:24:21,200 Speaker 12: dependency of Warsh and his history during. 538 00:24:20,960 --> 00:24:23,320 Speaker 2: The POSTGFC, you know, first you. 539 00:24:23,280 --> 00:24:26,840 Speaker 12: Know, why was it that the communications of the FED 540 00:24:26,920 --> 00:24:32,080 Speaker 12: became paramount for markets. That interchange about why markets stopped 541 00:24:32,119 --> 00:24:35,400 Speaker 12: paying attention to the data and instead of having their 542 00:24:35,400 --> 00:24:38,200 Speaker 12: own reaction function, they were reacting to what they thought 543 00:24:38,280 --> 00:24:41,120 Speaker 12: the fed's reaction function would be. And that's because the 544 00:24:41,160 --> 00:24:45,120 Speaker 12: era of the POSTGFC was the era of we will 545 00:24:45,160 --> 00:24:48,120 Speaker 12: do whatever it takes and believe me, it will be enough. 546 00:24:48,160 --> 00:24:51,040 Speaker 12: That was the quote from the ECB and Droggy when 547 00:24:51,119 --> 00:24:55,760 Speaker 12: he threatened bond markets that the central banks balance sheet 548 00:24:55,840 --> 00:24:58,119 Speaker 12: was bigger than the market's balance sheet and that ushered 549 00:24:58,200 --> 00:25:01,720 Speaker 12: in or was reflective of an where central banks were 550 00:25:01,720 --> 00:25:04,800 Speaker 12: the dominant price makers and he wants to do away 551 00:25:04,840 --> 00:25:07,520 Speaker 12: with that. Well, what's the primary tool for doing away 552 00:25:07,560 --> 00:25:10,160 Speaker 12: with that. It's the balance sheet. So one of those 553 00:25:10,200 --> 00:25:13,600 Speaker 12: tasks for US is maybe more important than the others 554 00:25:13,760 --> 00:25:16,600 Speaker 12: when it comes to markets and market reactions. Then the 555 00:25:16,640 --> 00:25:20,840 Speaker 12: second interchange that was really quite revealing was when asked 556 00:25:21,000 --> 00:25:25,719 Speaker 12: about restrictiveness. It wasn't so much about the unevenness, but 557 00:25:25,800 --> 00:25:28,200 Speaker 12: what he went on to say about what is the 558 00:25:28,240 --> 00:25:31,359 Speaker 12: source of the unevenness. I found that to be the 559 00:25:31,359 --> 00:25:34,640 Speaker 12: most revealing comment because he said that might be due 560 00:25:34,720 --> 00:25:38,840 Speaker 12: to transmission mechanisms, that one might be about the interest rates, 561 00:25:38,880 --> 00:25:42,879 Speaker 12: that's reflective to housing and the other the easiness of 562 00:25:42,960 --> 00:25:47,080 Speaker 12: financial conditions is about the balance sheet. Well, that's about 563 00:25:47,080 --> 00:25:50,440 Speaker 12: some of the risks of running an ample reserve system. 564 00:25:50,160 --> 00:25:53,399 Speaker 2: That maybe here is being hinted at being changed. 565 00:25:53,400 --> 00:25:55,280 Speaker 12: And if you were to change that, what has been 566 00:25:55,320 --> 00:25:58,160 Speaker 12: the biggest beneficiary of the big balance sheet the flattening 567 00:25:58,160 --> 00:26:00,880 Speaker 12: of the term premium, Right, That was a whole point 568 00:26:01,119 --> 00:26:04,120 Speaker 12: of a lot of the bond purchases was to bring 569 00:26:04,200 --> 00:26:07,520 Speaker 12: down that term premium, and we're still seeing the legacy 570 00:26:07,560 --> 00:26:11,159 Speaker 12: of that benefit. So if the signal here is maybe 571 00:26:11,240 --> 00:26:13,320 Speaker 12: we're gonna be hawkish on the balance sheet, I'm not 572 00:26:13,400 --> 00:26:16,800 Speaker 12: sure your reaction is big curve flattening. I get the 573 00:26:17,119 --> 00:26:22,040 Speaker 12: initial reaction hawkish surprise in terms of the focus on 574 00:26:22,480 --> 00:26:25,280 Speaker 12: price stability, but there may be some other second order 575 00:26:25,320 --> 00:26:29,120 Speaker 12: effects here we'll think about that actually will become first order. 576 00:26:29,720 --> 00:26:31,399 Speaker 8: So, Jeffrey, I got a question for you about the 577 00:26:31,400 --> 00:26:33,280 Speaker 8: balance sheet. I agree with a lot of your sentiment 578 00:26:33,320 --> 00:26:34,200 Speaker 8: about it, and. 579 00:26:34,160 --> 00:26:35,320 Speaker 2: I'm thinking back to. 580 00:26:36,920 --> 00:26:40,160 Speaker 8: Earlier with the FED when they adopted inflation targeting. It 581 00:26:40,200 --> 00:26:44,120 Speaker 8: took under BERNANKI five years before we eventually got inflation targeting. 582 00:26:44,720 --> 00:26:46,760 Speaker 8: We're gonna have to wait five years for them to 583 00:26:46,840 --> 00:26:49,480 Speaker 8: change the balance sheet. Can this institution, especially since they've 584 00:26:49,480 --> 00:26:51,679 Speaker 8: got FED Governor Michael Barr who's kind of against it 585 00:26:51,760 --> 00:26:54,360 Speaker 8: in the first place, to move that fast. So while 586 00:26:54,320 --> 00:26:56,040 Speaker 8: I agree with you about the balance sheet, is this 587 00:26:56,080 --> 00:26:57,880 Speaker 8: something that's going to take years to unfold? 588 00:26:59,640 --> 00:27:03,399 Speaker 2: Jim? I wonder you know we're around the same generation. 589 00:27:03,960 --> 00:27:07,520 Speaker 12: My reaction to the statement was, Wow, that looks like 590 00:27:07,560 --> 00:27:10,040 Speaker 12: one of the first statements I saw in my career Feb. 591 00:27:10,160 --> 00:27:14,840 Speaker 12: Ninety four about the same length, similar kind of tonality. 592 00:27:15,240 --> 00:27:17,080 Speaker 2: And how quickly did. 593 00:27:16,920 --> 00:27:22,280 Speaker 12: FED chair Wash change the communications basically on his first 594 00:27:22,359 --> 00:27:25,040 Speaker 12: day on the job. So I don't think from that 595 00:27:25,200 --> 00:27:28,040 Speaker 12: signal we're going to be waiting with this FED and 596 00:27:28,080 --> 00:27:31,159 Speaker 12: this FED share five years to make these kinds of changes. 597 00:27:31,200 --> 00:27:33,760 Speaker 12: And when asked the question, I think he even intimated 598 00:27:33,800 --> 00:27:36,960 Speaker 12: that he expects these committees to come back by the. 599 00:27:36,960 --> 00:27:37,480 Speaker 2: End of the year. 600 00:27:37,560 --> 00:27:39,000 Speaker 3: Well, Jeff, anyway slice it though. 601 00:27:39,000 --> 00:27:40,919 Speaker 4: This isn't great for risk assets, right, I mean, if 602 00:27:40,920 --> 00:27:43,840 Speaker 4: you're trinking the balance sheet, that's tightening and financial conditions. 603 00:27:43,960 --> 00:27:46,720 Speaker 4: If you're hiking interest rates, that's tightening of financial conditions. 604 00:27:46,760 --> 00:27:49,000 Speaker 4: Does this make you rethink some of your risk bet. 605 00:27:51,240 --> 00:27:55,760 Speaker 12: You know, the FED may be less supportive in terms 606 00:27:55,920 --> 00:27:59,760 Speaker 12: of financial conditions, but it's occurring in an environment where 607 00:28:00,119 --> 00:28:04,400 Speaker 12: the contribution, particularly to risky assets, of the fed's role 608 00:28:04,880 --> 00:28:09,320 Speaker 12: is much secondary, much more secondary to what we're seeing 609 00:28:09,320 --> 00:28:12,840 Speaker 12: in the real economy, right, and that's the AI impact, 610 00:28:12,880 --> 00:28:17,320 Speaker 12: the incredible amount of capital expenditures, the incredible amount of 611 00:28:17,320 --> 00:28:20,639 Speaker 12: earnings growth. So it might be an opportunistic moment for 612 00:28:20,720 --> 00:28:23,920 Speaker 12: the FED to take a step back on supportive financial 613 00:28:23,960 --> 00:28:26,640 Speaker 12: conditions when financial conditions can stand on their own. 614 00:28:27,280 --> 00:28:29,120 Speaker 7: Yeah, I mean, Jeff, I couldn't agree with you more 615 00:28:29,160 --> 00:28:31,760 Speaker 7: on this one. What's been driving the equity market, of course, 616 00:28:31,840 --> 00:28:35,480 Speaker 7: has been the earnings in the AI and the AI ecosystem, 617 00:28:35,760 --> 00:28:38,200 Speaker 7: as well as all the capex beneficiaries and the companies 618 00:28:38,240 --> 00:28:40,960 Speaker 7: and the industries that are benefiting from adopting this technology. 619 00:28:41,360 --> 00:28:44,120 Speaker 7: So it's hard to say that earnings are really coupled 620 00:28:44,160 --> 00:28:46,400 Speaker 7: in any way with the rate position at this point. 621 00:28:46,640 --> 00:28:49,440 Speaker 7: And then if we are fundamentally driven, which our team 622 00:28:49,520 --> 00:28:51,960 Speaker 7: certainly is, we have to stay focused on where the 623 00:28:51,960 --> 00:28:52,720 Speaker 7: earnings are going. 624 00:28:53,160 --> 00:28:54,840 Speaker 9: Who's growing them in this case is. 625 00:28:54,840 --> 00:28:57,880 Speaker 7: The US over everywhere else and regardless of where we are, 626 00:28:57,880 --> 00:29:00,440 Speaker 7: and kind of a relative monetary policy. The one thing 627 00:29:00,480 --> 00:29:02,040 Speaker 7: I just would want to highlight though, is that for 628 00:29:02,080 --> 00:29:05,200 Speaker 7: the fringe companies, the smaller companies, those that are reliant 629 00:29:05,240 --> 00:29:08,320 Speaker 7: on borrowing, people had gotten themselves incredibly excited, as you 630 00:29:08,320 --> 00:29:10,960 Speaker 7: remember in the beginning of the year around rate sensitive 631 00:29:10,960 --> 00:29:13,120 Speaker 7: parts of the equity market, like this is a time 632 00:29:13,120 --> 00:29:15,200 Speaker 7: for rotation, We're going to get excited. But now I 633 00:29:15,200 --> 00:29:17,720 Speaker 7: think we're getting a message very clearly from policy makers 634 00:29:18,040 --> 00:29:22,080 Speaker 7: that the rates trajectory is not lower in the near term. 635 00:29:22,280 --> 00:29:24,840 Speaker 7: At best case, we're kind of flat, and that's not 636 00:29:24,880 --> 00:29:26,600 Speaker 7: going to be an environment where companies that need to 637 00:29:26,600 --> 00:29:28,440 Speaker 7: borrow in order to keep up with their large cap 638 00:29:28,480 --> 00:29:30,479 Speaker 7: counterparts are going to be able to do so at 639 00:29:30,480 --> 00:29:33,000 Speaker 7: a very attractive rate. So that needs to be factored 640 00:29:33,000 --> 00:29:37,000 Speaker 7: into people's expectations for margins and then earnings, and if 641 00:29:37,040 --> 00:29:39,080 Speaker 7: you care about earnings in this case, which we really 642 00:29:39,120 --> 00:29:44,920 Speaker 7: certainly do, that should tilt your size overall exposure. 643 00:29:45,760 --> 00:29:47,760 Speaker 6: I wanted to go back to the idea about how 644 00:29:47,800 --> 00:29:52,200 Speaker 6: communications is changing under Fetcher Kevin Worsh. A question from 645 00:29:52,200 --> 00:29:55,360 Speaker 6: Michael McKee was on communications and press conferences, whether Worsh 646 00:29:55,400 --> 00:29:58,440 Speaker 6: would continue holding them after every meeting. He said that 647 00:29:58,480 --> 00:30:01,040 Speaker 6: they can be a useful way to communicate household and businesses, 648 00:30:01,080 --> 00:30:03,240 Speaker 6: but you need to have something to say. So that 649 00:30:03,320 --> 00:30:05,960 Speaker 6: suggests that perhaps it won't be a meeting a news 650 00:30:05,960 --> 00:30:10,600 Speaker 6: conference after every decision. Having said that, if household and 651 00:30:10,640 --> 00:30:13,520 Speaker 6: businesses are learning from this news conference or listening to this, Jeff, 652 00:30:13,560 --> 00:30:15,640 Speaker 6: what do you think they heard from this new FED chair, 653 00:30:15,720 --> 00:30:17,320 Speaker 6: what's the message for them? 654 00:30:18,240 --> 00:30:21,240 Speaker 12: Well, I think he wants us to reiterate the main message, 655 00:30:21,280 --> 00:30:24,960 Speaker 12: right he said. The other useful thing is everyone here 656 00:30:25,240 --> 00:30:26,960 Speaker 12: in the room helps to amplify. I don't know if 657 00:30:26,960 --> 00:30:28,520 Speaker 12: you said that, but I think it was implied you 658 00:30:28,560 --> 00:30:30,840 Speaker 12: help to amplify that message. And the message was the 659 00:30:30,840 --> 00:30:36,320 Speaker 12: recommitment to the fed's stability price stability of Price's goal. 660 00:30:36,480 --> 00:30:39,240 Speaker 12: And I think that's the message that he wanted to 661 00:30:39,280 --> 00:30:42,920 Speaker 12: get out, the recommitment to the attainment of the goal 662 00:30:43,160 --> 00:30:46,600 Speaker 12: and all the task forces and everything else around that 663 00:30:47,360 --> 00:30:50,560 Speaker 12: is really in service of that, in recognition that for 664 00:30:50,640 --> 00:30:54,560 Speaker 12: the past five years there's clearly been a failing on 665 00:30:54,600 --> 00:30:55,560 Speaker 12: that far on that part. 666 00:30:55,720 --> 00:30:58,480 Speaker 4: Jeffrey Rosenberg of Blackrock, thank you so much for being 667 00:30:58,480 --> 00:31:00,760 Speaker 4: with us and breaking it all down. And Kate Moore, 668 00:31:00,880 --> 00:31:04,520 Speaker 4: Jim Bianco you're still here, Jim. Final thoughts on exactly 669 00:31:04,560 --> 00:31:06,800 Speaker 4: what we've experienced in this history making day. 670 00:31:07,720 --> 00:31:10,040 Speaker 8: We're going to see a different type of FED right now, 671 00:31:10,120 --> 00:31:13,479 Speaker 8: with a different type of objective and communication style, and 672 00:31:13,520 --> 00:31:16,320 Speaker 8: that that's not necessarily a bad thing. I think the 673 00:31:16,360 --> 00:31:20,920 Speaker 8: market reaction is appropriate because part of the path that 674 00:31:20,920 --> 00:31:22,680 Speaker 8: they're going to go on is going to follow a 675 00:31:22,720 --> 00:31:25,280 Speaker 8: lot of the other central banks. In the last week, 676 00:31:25,320 --> 00:31:28,160 Speaker 8: the CBS raised rates, the Bank of Japan has raised rates, 677 00:31:28,360 --> 00:31:30,840 Speaker 8: and now the Federal Reserve is suggesting that they're going. 678 00:31:30,720 --> 00:31:33,080 Speaker 2: To raise rates too, so they're all moving in that direction. 679 00:31:33,280 --> 00:31:36,960 Speaker 7: Okay, I love the overall message again around working with 680 00:31:37,000 --> 00:31:39,920 Speaker 7: the rest of the FOMC, around bringing in outside voices 681 00:31:39,960 --> 00:31:43,120 Speaker 7: to these task forces. But I do want to say something. 682 00:31:43,160 --> 00:31:46,680 Speaker 7: It's important to reiterate that commitment to price stability and 683 00:31:46,800 --> 00:31:49,040 Speaker 7: to the target. But there's a phrase I keeps coming 684 00:31:49,080 --> 00:31:52,120 Speaker 7: back into my mind, which is your action speaks so loudly, 685 00:31:52,160 --> 00:31:54,640 Speaker 7: I can't hear what you're saying. So let's see if 686 00:31:54,680 --> 00:31:56,960 Speaker 7: there's follow through in terms of action and not just 687 00:31:57,000 --> 00:31:58,960 Speaker 7: trying to jobble in the market to say, hey, we 688 00:31:59,000 --> 00:32:02,360 Speaker 7: do care about it, not taking the necessary policy actions. 689 00:32:02,040 --> 00:32:03,880 Speaker 9: In order to get us closer to that goal. 690 00:32:04,200 --> 00:32:06,640 Speaker 7: So I'll be watching very closely what happens over kind 691 00:32:06,680 --> 00:32:08,880 Speaker 7: of the next you know, six to twelve weeks, against 692 00:32:08,880 --> 00:32:09,840 Speaker 7: the next couple of meetings.